Write down why you own it
If you cannot state the thesis in a few sentences, you do not have one. Writing it down before you buy is the cheapest discipline in investing - and the one most often skipped.
Before buying anything, it is worth writing down - plainly, in a few sentences - what the business does, why it is worth owning, what you expect to happen, and what would prove you wrong. If that cannot be written clearly, the research is not finished, whatever the spreadsheet says.
What the thesis should contain
Four things: how the business makes money and why that is durable; what has to go right for the investment to work; what would make you conclude the thesis is broken; and roughly what you are paying relative to what you think it is worth. Anything longer usually hides the fact that the core reason is unclear.
It makes later decisions easier
Two years on, when the price has fallen and the mood is bad, the written thesis is the only reliable check on whether anything has actually changed. Without it, memory quietly rewrites itself to match the price - which is exactly how investors talk themselves into selling good businesses and holding broken ones.
The falsification line is the valuable part
Stating in advance what would prove you wrong is uncomfortable, and that is precisely why it works. It converts a vague optimism into a testable claim, and it gives you permission to change your mind on evidence rather than on mood.
Got a question on what you have just read - on bottom-up research, quality investing, or the Category III AIF structure? Write directly to the office. These essays are general views only, not investment advice.
A research-led equity investor with over twenty years in the Indian markets. Designated Partner of Stonebridge Advisors LLP, Investment Manager of Anchor Rock Investment Fund - I, a SEBI-registered Category III AIF.